December 11, 2006 4:00 AM PST

Making Cisco a household name

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"It's going to be really important for us over the next few years to get closer to the media companies, such as Disney, Viacom, Time Warner, etc.," Scheinman said. "If you look at the media landscape, only a few have had big online success. Fox and Viacom have done fairly well, but a lot of the companies are still figuring it out. We want to work with them as they become more Web friendly because that will ultimately help us enable services that consumers really want."

Scheinman's new role will be to work with these media companies in New York, London, Mumbai or wherever else they are creating the content to make sure that Cisco is building products that are relevant to their goals.

"We are hitting the market at a time of change that is being driven by consumer demand."
--Dan Scheinman, who will head Cisco's Media Solutions Group

This strategy has worked well for Cisco in selling products to large business customers. For years the company has consulted its largest customers as part of its sales process in hopes of learning more about their business needs.

"The one thing that Cisco seems to have learned is that good technology can do wonders for the business," Kerravala said. "But the ecosystem and partnerships really help provide long-term viability. The more relevant Cisco can be to the content owners, the more success they're likely to have."

Cisco has started doing this already with its service provider customers. In August, it bought a start-up called Arroyo, a software company that aims to help cable operators and phone companies deliver a more flexible video-on-demand service. Last week Cisco announced that it repackaged the software so that service providers can offer network-based personal video recorder services and the insertion of local advertisements.

"The Arroyo product takes advantage of the Internet model to create a good experience for customers and provides a new revenue stream for service provider partners," Scheinman said.

A strong foundation
The Linksys and the Scientific-Atlanta acquisitions are the cornerstones that have put Cisco in position to address a changing tide in how media is delivered and consumed in the home.

The acquisition of Scientific-Atlanta, the No. 2 set-top maker in the U.S., gives Cisco end-to-end video delivery expertise and instantly gets the company into millions of homes. Add to that Cisco's networking expertise, and a powerful operation is forged.

Cable operators are converting their networks to Internet Protocol. Telephone companies are entering the TV market with IP-based TV services. Much of this IP-centric video is being generated by on-demand services that allow consumers to stream to their TV whatever movie or TV show they want to watch, whenever they want to watch it. As these services become more popular, video will eat up more capacity on the network. And Cisco, being the company that provides the infrastructure that boosts bandwidth, has the gear to increase capacity.

"The market is at an inflection point," Scheinman said. "Video and high-definition video is taking off, and few companies out there can build big-scale video networks."

But Cisco doesn't just want to sell big routers and switches to cable and telephone companies, it also wants to provide equipment that sits in people's living rooms. Just as Cisco helped the corporate world gain efficiency by networking workstations, printers and servers, it plans to use the same strategy to help consumers connect consumer electronics and access entertainment over an IP network.

This is where the set-top boxes from Scientific-Atlanta, the consumer electronics devices from Kiss Technology--a company acquired last year--and the home routers from Linksys come into play.

At the same time, a dramatic shift in consumer behavior is under way. Until recently, home networking has largely been confined to connecting PCs to a broadband modem. But many people are starting to link multiple computers, telephones, televisions, personal video recorders (PVRs), games consoles, home security systems and other digital devices into a home network.

"We're all becoming more demanding, craving access to up-to-the-minute entertainment and information, wherever and whenever we want it," said John Bird, Principal Analyst at the U.K.-based consulting firm Understanding & Solutions. "Home networking is the new gateway that manages, transports and stores our information across multiple devices within the home: it's the great content enabler."

Bird predicts that by 2010 at least 30 percent to 50 percent of all consumer electronics devices for sale will be network-enabled. What's more, PCs are increasingly being used to store entertainment content, which consumers want to access and view on other consumer electronics around the home such as TVs and home stereos.

All of this spells good news for Cisco, which plans to be the company making all this video and multimedia sharing possible--from the content creators to the service providers to, ultimately, the consumer.

"The market is telling us what kind of company we have to be in the next several years," Scheinman said. "We are hitting the market at a time of change that is being driven by consumer demand. And in technology, if you don't keep up with where the demand is coming from, you run the risk of falling behind. So we have to be more consumer-friendly."

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